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Retail Law Advisor

The Power of the Melody Pushes Fashion Forward

Posted in Retail, Retail Sales

The many genres of music – particularly, rock, pop, hip-hop and country – have always pushed the needle forward in fashion. Musical icons from today and yesteryear have given a voice to fashion by creating a kinetic experience full of imagery and a visceral aesthetic that retailers long to foster in their brick and mortar retail stores. Today, music’s grip and influence on fashion have become more and more evident with the boom of music festivals that have become Millenial’s and Gen Z’s version of Woodstock and Glastonbury. Music festivals, including SXSW, Panorama, Bonnaroo, and Coachella have become “see and be seen” fashion experiences. And, recently, retailers have taken notice and launched festival-inspired fashion capsules in an effort to ride the wave of music festivals. Major international retailers, such as ASOS, Nordstrom and Macy’s, have designed comprehensive campaigns appealing to music festival fans. By promoting these music festivals on social media and creating festival-worthy fashion lines, these retailers have inspired brand loyalty among a target market of Gen Z and Millenial consumers, and, more importantly, offered festival fashionistas a streamlined method of outfit shopping. In the coming years, competition among retailers courting music festival fans will only increase as the international love affair with music festivals further escalates.

Music festivals, which are a perennial draw for A-list celebrities and social-media influencers, celebrate street style as much as the music they are supposed to exhibit. In a strange twist, music festivals have become a social calendar event where what fashion-conscious onlookers are wearing is just as important as the artists performing. These content creators all have the ability to jumpstart a new trend that will become the next #Instafashion moment. Given the enormous popularity of music festivals – evidenced by each #hashtag and geotag – on social channels such as Snapchat, Instagram and Youtube, savvy retailers have capitalized by sponsoring these events and opening up pop-up stores on site. These retailers hope to capture the heart of the Millennial customer who will now associate the brand with an experience, hopefully engendering brand loyalty going forward. Nordstrom was one of the first retailers to open up pop-up shops at music festivals, which included a photo booth where customers were encouraged to upload the photos to social media and use its hashtag. Marketing campaigns that are seamlessly integrated into event experiences tend to resonate with consumers on a deeper level. By leveraging the social capital of music festivals, retailers such as Nordstrom have been able to cast a wider net in an effort to sell their products to future festival goers.

Music festivals are fast becoming the Super Bowl (Congrats! @Patriots) in the fashion calendar. And, considering the global reach of music festivals, retailers’ opportunities to increase sales and reach new consumers appear endless. For retailers that step up to the plate and create interactive experiences on the festival grounds or at a star studded sponsored private party, music festivals can be a home run marketing opportunity that engages both festival-goers and followers on social media.

The (Border) Adjustment Bureau: Hold On to Your (Imported) Hats

Posted in Cross Border, Retail, Retail Sales, Tax

euro and dollar sign_dreamstimefree_2840174Retailers would be wise to pay close attention to the upcoming tax-plan deliberations of the 115th U.S. Congress. A proposal currently being considered would adjust the U.S. corporate tax by making imports a non-deductible expense. This adjustment is intended to create incentives for domestic production, as companies would no longer be able to reduce their taxable income by deducting their overseas expenditures.

Here’s an example. Currently, if Joe Retailer imports $1 million of goods, spends $500,000 on domestic costs and sells the products for $2 million, Joe could deduct the cost of the imports and all domestic costs from the sales amount, and would pay 35% in taxes on $500,000, for a total tax hit of $175,000. Under the proposed plan, however, Joe would be able to deduct only the $500,000 in domestic costs, and would pay 20% in taxes on $1.5 million, for a total tax hit of $300,000.

Thus, some retailers importing goods made abroad fear a looming tax crunch. Recent media reports have highlighted the potential effects of the proposal on the apparel, toy, and electronics industries, although other import-heavy industries find themselves in a similar situation. According to one RBC Capital Markets analyst, cited in a recent Wall Street Journal article, the earnings loss to six large retailers from a “border adjustment” could total $13 billion. Other economists, however, are downplaying these concerns, noting that such companies could recoup any tax losses with gains from decreased importation costs and a stronger U.S. economy. Companies may also attempt to pass increased tax costs through to the consumer by raising the price of goods.

Of course, the final fully-negotiated tax plan may look vastly different from the current proposal. Indeed, President Trump has publicly criticized the border-adjustment component of the GOP tax plan, saying “Anytime I hear border adjustment, I don’t love it.” Even if passed in its current form, the economic effect of the proposal on retailers, consumers, and the overall economy is hotly debated. Nonetheless, it is worth keeping an eye on the result of negotiations concerning the “border adjustment”.

A final thought: Despite the murkiness of the future under the new administration and Congress, one outcome is crystal-clear:

Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman
Should five per cent appear too small
Be thankful I don’t take it all

–       The Beatles

 

 

Oh the Sidewalks Outside Are Frightful, But Landlords Will Make Them Delightful… or Will They?

Posted in Compliance, Landlords, Leasing, Real Estate, Retail, Tenant

ShovelAlthough we haven’t seen much snow accumulation in the northeast to date, we know that this can (and likely will) change before the warmer weather returns. Before the snow really begins to fall, it would behoove both landlords and tenants to become informed about their snow clearing responsibilities and to ensure removal plans are in place that are compliant with laws and lease documents.

The City of Boston (City) and other major cities such as Chicago and New York require property owners to bear the responsibility of removing snow and ice from sidewalks abutting their properties. Although each local ordinance differs with respect to the nature of the accumulation and time of day that the snow must be removed, all ordinances impose fines for non-compliance. Currently, the fine for failure to comply with the City’s snow removal ordinance ranges from $50-$200.  A Bill was proposed in March, 2015 which would give the City the authority to increase these fines, but due to the widespread impact and the potentially steep increase in the fines, the Bill initially met some opposition. However, it seems that concerns for pedestrian and vehicular safety tipped the scales, and on December 30, 2016, Massachusetts’ Governor Charlie Baker signed the new Bill into law giving the City the authority to increase the fines. This new law enables the City to impose fines up to $1,500.00 on owners of commercial properties and buildings containing more than six residential units who fail to remove snow or ice from sidewalks as required or if the snow is placed in the public way. The Mayor and the Boston City Council are now responsible for determining the new fines.

In addition to the obligations imposed by the City, property owners also have common law duties in connection with snow removal. In a previous article, we discussed the Massachusetts Supreme Judicial Court (SJC) case Papadopoulos v Target Corp, 457 Mass, 368 (2010) which established a new standard of measuring liability for tort actions involving snow removal. In particular, property owners are now required to act as a “reasonable person under all the circumstances”. Accordingly, it is of particular importance that landlords allocate snow and ice responsibilities in lease documents.

In a typical retail lease, landlords are responsible for the maintenance of common areas, including the removal of snow and ice. However, it is not uncommon for a retail lease to include a provision that obligates the tenant to remove snow and ice from its entryway and the sidewalks abutting its space. While tenants are reluctant to obligate themselves to perform this duty, particularly when they are paying common area maintenance costs, it may be in the best interest of both parties for tenants to be responsible for snow removal from certain areas close to the premises. Even when a landlord actively works at the property to remove the snow, significant accumulations often make it difficult for a landlord’s crew to keep up with clearing all parking areas and sidewalks to satisfy the City’s ordinance and the common law. On the other hand, tenants are uniquely situated to ensure that the snow is cleared in an expeditious manner that permits its customers to safely access their business. Regardless of how the duties are assigned in your lease, keep in mind the long term implications on your snowy day fund if you fail to follow the requirements of the City’s ordinance or the lease and pay careful attention to compliance.

Upscale Food Halls—On Trend and On The Rise

Posted in Landlords, Leasing, Real Estate, Restaurants, Retail, Retail Sales

forks_86449_imageThe growth of high-end food halls is taking off around the country as consumers seek fast, fresh, high-quality, chef-driven meals with a local touch, and as landlords seek to cash in on the continued growth of fast-casual dining. These boutique-style, upscale food halls are modeled more after famous European markets like Barcelona’s Mercado de la Boqueria than after airport or suburban mall food courts. Following the success in New York City of Eataly, Todd English Food Hall at the Plaza and Chelsea Market, food halls are experiencing a wave of growth across the country.

Eataly, which launched its first store in Turin, Italy in 2007, opened in New York City in 2010 with a mix of restaurants and retail market stands selling high quality Italian food products from both Italian and New York area producers, with New York celebrity chef and restaurateurs Mario Batali and Joe Bastianich providing an imprimatur of quality and authenticity. Eataly New York features gourmet groceries, coffee and pastries, a variety of grab and go options and full service restaurants to drive business throughout the day. Eataly now operates two markets in New York City and one in Chicago, is developing a store in Los Angeles, and has just opened a 45,000 square foot store at Boston’s Prudential Center. Eataly’s newest store in Boston will have its own local flair, a collaboration with local Boston celebrity chef Barbara Lynch and products from producers across New England to compliment the wide range of Italian products offered for sale.

Rather than a single entity operating all of the stands and restaurants, as is the case at Eataly, New York’s Chelsea Market, located near the High-Line, but a tourist destination in its own right, offers a well-curated selection of high-quality shops, food stands, and restaurants, with a focus on local, New York businesses. This template is being replicated in different neighborhoods across New York City with new food halls such as UrbanSpace Vanderbilt, and Gotham West Market. It is also being replicated in other cities across the country, as evidenced by Union Market in Washington DC, Ponce City Market in Atlanta, and the Pine Street Market in Portland, to name a few.

Food halls sit at the intersection of a number of trends and desires. For consumers, these include increasing spending on food and, in particular, on restaurants, preferences shifting toward unique experiences, and demand for fresh, healthier food, with a local twist. For restaurants, food halls offer a great location and the ability to open a physical presence for a fraction of the capital commitment of a standalone store. And for landlords, food halls are a highly desirable retail amenity, in a retail sector experiencing strong growth, with the ability to mitigate risk across a larger number of smaller tenants. Food halls may not be the answer for every retail space. But with high-end food halls operating successfully in many different markets across the country, the number of these upscale food halls seems likely to continue increasing each year.

Amazon Go: Let’s Get (More) Physical

Posted in Retail, Retail Sales

omnichannelWe recently noted that among the latest e-tail trends is the expansion of once exclusively online retail operations into physical store locations. In-store sales continue to dominate over online sales, with the U.S. Census Bureau reporting that online sales in the third quarter of 2016 accounted for only about 7.7% of all retail sales (which was true also for the first quarter of 2016). Breaking the comparison down into categories of sales, online purchases comprise only 4% of all food and beverage sales. This may be due, in part, to the fact that 80% of all Americans live within close (less than 2.5 miles) proximity to a supermarket. Whatever the reason, Amazon is paying attention and its confidence in the staying power of brick and mortar food shops is evidenced by its latest venture – Amazon Go.

Amazon Go locations (currently just one location – in Seattle, of course) will offer prepared foods, beverages and other grocery items to customers. The difference? No need to check out and, thus, no lines. Amazon’s so-called “Just Walk Out Technology” – a combination of computer vision, sensor fusion and deep learning, apparently similar to the technology used in self-driving cars – enables customers, who gain access to the store (through electronic turnstiles similar to those used in many subway stations) through use of an app, to select what they want and simply walk out of the store. Customers are charged based on what they pick up off the shelf (the price will be adjusted down for any items that are put back) without the need to wait in line to make a purchase with a cashier. No cashiers means substantially fewer employees, though someone will have to be there to restock the shelves and answer the inevitable questions about the process. And there will also be chefs on-site preparing many of the meals and snacks offered at the store. The first and only Amazon Go location is currently open exclusively to Amazon employees – it is housed within the ground floor of one of Amazon’s Seattle office towers – but Amazon plans to open the store to the public in early 2017. Presumably, Amazon will rollout additional stores after it irons out the kinks at the Seattle location.

Time will tell whether other retailers will similarly move in the direction of technology-based (as opposed to salesperson-based) sales, and what the overall impact on retail, as well as employment rates, will be. In discussing whether Amazon is destroying retail or merely reshaping it, Forbes recently took the position that the latter is the case and boldly stated that “Amazon is doing more than most store-based retailers to try to define what a store should truly be in the future.” The ultimate success of Amazon Go, not to mention the ability of other retailers to afford to purchase and implement technology similar to Amazon’s patented Just Walk Out Technology, will determine whether this latest Amazon endeavor will actually reshape retail or if it is only a fad. Regardless of its long-term implications, we think it’s pretty cool [cue the Jetsons theme song].

Mobile Payments: Exciting but Unknown

Posted in Restaurants, Retail, Retail Sales, Security, Technology

apple payMobile payment options are no longer the wave of the future. They are already here. It was projected that there would be almost 450 million mobile payment users worldwide by the end of 2016. These users generated $60 billion in mobile payment sales in 2016 alone.  Certain studies project that by the year 2020, 90 percent of mobile phone users will make a mobile payment, and those mobile payments will account for over $500 billion in sales in 2020. These numbers are significant. If retailers do not already offer a mobile payment option, they could miss out on a major source of revenue.

Retailers can offer their customers a mobile payment option in a variety of ways. Some stores have launched a payment feature within their own mobile application (e.g., CVS, Kohl’s and Wal-Mart). Other stores rely on already-established third-party payment platforms such as Apple Pay and PayPal. Regardless of the method, offering a mobile payment option provides certain advantages to both merchants and consumers, such as providing a faster checkout experience, developing loyalty through rewards programs, and allowing merchants to gain a better understanding of their customers’ purchasing habits.

These potential advantages suggest that the use of mobile payments will only continue to grow. One area of mobile payments that experts expect to expand in 2017 is “contactless” or “proximity” transactions – i.e., transactions that will be completed by tapping a card against a machine or using a digital wallet to pay for a productBloomberg Technology has noted that, according to certain studies, by 2019, “the total value of transactions made by tapping a phone on an in-store terminal will reach $210 billion, up from $8.7 billion in 2015.” Because of the nature of the retail environment, retailers can expect to receive the majority of that revenue. One study shows that, in 2015, 61 percent of all “proximity mobile” payments in the United States took place in the retail environment.

Further, not only will the number of mobile payment users continue to grow, mobile payment technology will continue to evolve. Google recently announced a new mobile payment application that uses Bluetooth or Wi-Fi to allow the user to make a payment without even taking their smartphone out of their pocket or purse. Other tech companies are focusing on developing technology that will allow consumers to use their clothing and accessories to make purchases.

These trends all lead to the same conclusion. Within the next few years, consumers will expect their retailers to provide them with a mobile payment option of one sort or another. In response, retailers will, and in fact have already started to, race to develop and implement the most efficient and profitable mobile payment option available. However, this race to provide a mobile payment option as quickly as possible has resulted in a “fragmented marketplace with different technology types and business models.” The lack of consistency among stakeholders has complicated the already difficult task of regulating the mobile payment industry, which in turn has opened the door for possible failures or weaknesses, such as fraud and lack of security over consumers’ personal information.

The bottom line is that retailers must adapt by providing their customers with the mobile payment option that best suits the needs of both the retailer and their customers. However, in doing so, retailers must also acknowledge that the mobile payment industry is still developing and that there is not yet an established global regulatory framework that will protect them from potential failures or weaknesses. As a result, retailers should proceed cautiously and should take proactive measures to avoid failures and weaknesses in their mobile payment options.

Happy New Year to the Retail Industry!

Posted in Holiday

new-year-2016-imagesAs we welcome 2017, we wish to recognize our Retail Law Advisor readers and subscribers as we begin our 5th year of blogging this January. Because of you, we proudly mark this milestone with the blog’s inclusion on the ABA Journal’s Blawg 100 list. This list of blogs, created through a nomination process across thirteen categories, is a sought-after award for legal bloggers. We enthusiastically continue our commitment to providing the retail industry with a top-notch resource for trending topics and important updates relevant to your businesses.

We wish you a happy and successful New Year!

Warmest Wishes,
The Retail Law Advisor editorial board

Coming to a Retailer Near You: Made in USA Labeling Requirements

Posted in Regulatory, Retail, Retail Sales

dreamstimefree_17461Patriotism is a hot topic in the United States. One study shows 51% of American consumers will pay higher prices to buy American made products. Not surprisingly, manufacturers actively promote products with the red, white and blue labels proudly proclaiming “Made in USA” to capture those consumers. In fact, some iconic American brands such as Ford, Kraft and GE, are working to get more of their products made in America. There is a lot of pride among American consumers evidenced by spending habits for the products carrying the promise that they were made on home turf. Much was made during the presidential campaign about Donald Trump’s products and whether or not they are manufactured in the US or abroad.

But how do we know the validity of the “Made in USA” promise? Since the 1990s, there have been standards in place for labeling products “Made in USA” to address concerns that manufacturers could overstate the extent to which they meet the requirements. The Federal Trade Commission (FTC), the party responsible for preventing deception and unfairness in the marketplace, states that products must be assembled or ‘substantially transformed’ in the United States and must only contain ‘negligible foreign content’. While the Commission does not pre-approve advertising or labeling claims, it does not mean companies can skirt responsibility.  Any consumer can make a complaint to the FTC that a brand is engaging in deceptive advertising practices through mislabeling products. We see increased enforcement activity by the FTC, but with the upcoming transition from the Obama administration to the Trump administration, there are additional enforcement uncertainties.

Ultimately, the question for manufacturers and retailers is: Will the “Made in USA” label mean more than ever over the next four years?  Time will tell, but if that is the case, it is important for businesses to understand how to meet the standards for the “Made in USA” label, including how state laws regulate American manufacturing. What to do?  For starters, companies should consider ways to keep careful tabs on what goes into their products and consult with legal counsel on how to keep the labels legally compliant.

A Tale of Two Conventions: MAPIC and ICSC New York

Posted in Retail

globe_10767872Autumn has been a busy time for our Retail, Restaurant and Consumer team, with our attendance at two major industry events each attracting thousands of attendees. Interestingly, both events recorded their largest attendance numbers to date, and given Brexit and the results of the U.S. presidential election there was much fodder for discussion. Here’s what we learned:

For the sixth year in a row, a contingent from Goulston & Storrs attended the annual MAPIC (le marché international professionnel de l’implantation commerciale et de la distribution) conference in Cannes, France in late November. Over 9,000 attendees convened in Cannes for three days of exhibition, presentations and networking events. We noticed the presence of more retailers this year, including start-up retailers, and an increase in attendance by service providers (mostly technology based vendors). We also noticed the presence of more U.S. based retail owners/developers, including our client WS Development. WS Development, along with representatives from The Lansco Corporation, Marvin Traub and Millman Executive Search, joined our panel entitled “USA Retail: Strategies for Successfully Bringing Your Brand to the States.” A lively discussion as always, we leveraged the group’s collective decades of experience in counseling retailers on their USA expansion plans and covered everything from location, talent acquisition, and the continued effects of omnichannel and the sharing economy.

As anticipated, the first question we were asked on the exhibition floor was about the results of the U.S. presidential election. Many attendees seemed knowledgeable of our election process (including the purpose of the Electoral College). Most were also surprised by the results and many were shocked with the tone and demeanor of the campaign.

The second most-discussed topic was Brexit and its impact on London and the rest of the UK, Europe and the U.S. Many of the Brits we spoke with said that, if the vote were held today, they think the vote would be to remain in the EU. Many noticed that, after a pause following the Brexit vote, business activity is picking up in London. They see more leasing activity, including the payment of key money by retailers wanting to secure prime locations. A major mall operator in and around London, for example, has two malls opening soon and their executives seemed optimistic about the success of these projects and retail in general in the UK. Historically, London has served as a spring board for European retailers before they enter the U.S. Italian, German, Spanish and other European retailers first open stores in London before they expand to the U.S. There was some thinking that, as a result of Brexit, these retailers may opt to skip London and come directly to the U.S.

Many of the people that we spoke with were very concerned with the surge in nationalism across the globe, first with Brexit and now with President-Elect Trump. Many believe that Germany may emerge as the defender of what many consider Western values – global trade, open borders and an inclusive social agenda. Spain appears to be having a financial resurgence. Our colleagues at the Manubens law firm, which is based in Barcelona, sent a large contingent of lawyers to the conference, and noted the positive change in Spain in the last ten years. The Brits we spoke with believe that many in Europe will view London as a good place to invest in real estate. They also believed that London will not lose its place as the financial center of Europe. The Germans, French and other Europeans we spoke with also thought that London is a desirable place to invest in real estate. However, some think that the financial center for Europe will move from London to Frankfurt, Madrid or Barcelona. Conversely, a recent article in the Financial Times (November 18, 2016) suggested that the U.S. might be the beneficiary of Brexit speculating that the European financial center will migrate to Manhattan because Manhattan already has the infrastructure in place to support the financial institutions and will become even more attractive to these institutions if President-Elect Trump is successful in relaxing current banking regulations as he has suggested.

Speaking of Manhattan, with the Trump Tower just a few blocks away, Goulston & Storrs also attended the annual ICSC New York conference in early December.

Record attendance of over 10,000 sparked a good mood overall, and one poll by an exhibitor showed that most respondents expected the economy to be even better in 2017. Deals are being done, and a surprising number of retailers are focused on growth. There are more vacant spaces in New York City than in past years resulting, in part, from landlords’ expectations that they can continue to achieve record setting rents for retail space. However, there appears to be a growing realization that these “record” rents can no longer be justified, and there is some optimism that a market correction is underway, which will lead to new stores being able open in these vacant spaces. Many also note that, in more conventional suburban shopping centers and malls, traditional retailers are decreasing the size of their stores as they focus on, and reap some of the benefits of, eCommerce. On the other hand, eCommerce retailers are realizing that they need to open old fashioned brick and mortar stores in order to grow and prosper, and these retailers are taking excess space in many urban and suburban retail projects.

As far as the U.S. election is concerned, no one we spoke with at the NY ICSC thought that their businesses would be threatened by the results of the election. On the contrary, most thought their businesses would see better days ahead. The election was not the main topic of conversation as it was at MAPIC, and we associate that with the tendency of most Americans (even New Yorkers) preferring to shy away from having public discussions about politics.

Interestingly, as the New York ICSC gets bigger, people in our industry are wondering about the ICSC’s objectives for the New York ICSC. Does it continue to be a larger version of itself as primarily a deal making conference perhaps eclipsing RECon one day, or does it become more of a networking conference, like the ICSC OAC, with an international bent like MAPIC? Those C-suite executives with whom we spoke prefer the later.

The Retail Law Advisor team will report on all of these and other developments as we continue to travel to future industry events.

Blockchain – The Future of Real Estate?

Posted in Finance, Real Estate, Retail, Retail Sales, Technology

BlockchainBitcoin and blockchain technology have been gaining publicity in recent years, and although they are primarily known for their use as a digital payment system, there are also promising uses in many areas where trust, cost and efficiency can be improved, including real estate.

So what is blockchain, exactly?

Blockchain is a distributed ledger system that maintains a continuously growing record of transactions, or blocks, where each block is linked to a previous block and cannot be altered or reversed once it is added to the chain, and which does not require a central administrator to guarantee the veracity of any transaction. It is essentially a technological solution to the issue of trust in a record or transaction. Blockchain is the underlying technology behind bitcoin, which is a digital token that allows one party to pay another anywhere in the world for goods and services, in some ways like cash. Just like a dollar bill, a bitcoin, once used, permanently passes to another person and cannot be reused or unilaterally withdrawn. With a dollar bill, this is because the bill physically passes to another party; with a bitcoin, this is because the transaction is etched in the public ledger and cannot be undone. Blockchain technology eliminates situations akin to receiving a blank check where there is no value in the underlying account or paying a seller for land that he does not own. Furthermore, because the transaction itself is secure, the cost of the transaction can be significantly lower when compared to traditional payment methods such as credit card payments, international remittances, or any situation where there is a third party guarantor.

The real estate industry is taking notice of these potential benefits. Real estate startups such as RealtyShares are accepting bitcoin as payment to lower transaction fees and to open the investment to international investors who often have to deal with complicated traditional structured instruments. Beyond using bitcoin as a payment method, the two major areas in real estate where some foresee bitcoin or blockchain being useful would be in searching for and establishing chain of title for property and in escrow functions for exchanges of value.

The current state of recording title or ownership of real estate is antiquated, fragmented and disorganized. For the most part, each individual county in the United States retains its own registry of title information that is usually difficult to search and closed off from other registries. There is tremendous potential benefit in attaching a chain of title to bitcoin or other distributed ledger system that can slowly expand to include all fifty states or even other types of property, such as fixtures, which are also filed according to a similar fragmented system. Of course, each county registry likely wants to maintain control over its own office and geographic area rather than cede control to a public ledger. Since title companies already maintain their own databases, it may be likely that title companies, rather than governmental bodies, begin to maintain a parallel blockchain database of title transfers which can exist for a transitional period of time until the county recording system becomes obsolete. Moreover, as certainty of title increases, the title company’s risk in providing title coverage decreases, and costs for title premiums should decrease as well. Startups such as Ubitquity are attempting to use blockchain to solve some of these very issues. The Cook County Recorder’s office, in partnership with blockchain real estate startup Velox.re, is also testing the use of the bitcoin blockchain for transferring and tracking title transfers, a system for filing liens, compatibility between a blockchain and a traditional, centralized system, and the prevention of fraud. This is significant not only because Cook County is the first registry in the country to test blockchain technology, but also because it is testing the use of public bitcoin blockchain (as opposed to a separate private blockchain). It will be interesting to see whether a working blockchain title system emerges from the private or public sector first.

Another area where blockchain would be useful is in verifying transactions. Currently, real estate transactions commonly use an escrow agent, perhaps the title company, broker, or other trusted neutral third party, to hold funds prior to closing. This third party must be trusted to safeguard the funds and to release them to the correct party once both parties agree or according to a set list of conditions if they do not. Blockchain technology may allow for multisignature transactions where once all required parties sign, or once verifiable conditions are met, funds release automatically.

There are numerous and complex concerns related to the use of blockchain technology in real estate, including questions of its actual security implications and ability to reflect the nuances of complicated transactions. However, the enormous potential of this technology demands careful monitoring and we will continue to do so.

On October 6, 2016, Goulston & Storrs sponsored MIT’s Real Disruption Conference on Real Estate Blockchain discussing the potential uses of blockchain in real estate transactions. Michael Casey, senior advisor at MIT Media Lab and blockchain expert, moderated the panel, which consisted of Avi Spielman, the author of Blockchain: Digitally Rebuilding the Real Estate Industry; Dan Doney, CEO of Securrency, and Christian Saucier, CTO of Ubitquity. Goulston & Storrs also hosted Dan Doney at its Real Estate Group Meeting on December 6, 2016 for a more in-depth discussion with our real estate attorneys.